India Inc Asks: Was the Board Really Unaware?
Condemning attempts to mislead stakeholders, software major Wipro has demanded a detailed investigation into the Satyam fraud case involving its founder Ramalinga Raju. Suresh Senapathy, executive director and chief financial officer at Wipro in a press statement said that global standards of corporate transparency are very high, and they are confident that this is an isolated case, and not representative of the IT industry. "We think a detailed investigation of this incident is urgently called for and needs to be undertaken by the authorities without delay."
Keki Mistry, vice chairman and managing director, at HDFC asked, "How could the books be cooked?" He said something at this scale could not have happened without the CFO’s knowledge. "I think these things are unacceptable. I had three investors who came and met me, and said the confidence level among investors would be shattered. The company that was perceived to be well managed is being questioned. Globally, we have also seen such things happening."
V. Balakrishnan, chief financial officer, Infosys, however, said the incident does not reflect the governance structure of the entire industry in India. "It is an isolated case, just like Enron in US. The regulators should get into the case and punish them. It is important to bring back credibility." He alleged that Satyam was cooking up the books for a very long time. "They have done it systematically… it is shocking that it has gone unnoticed."
Keshav Murugesh, president of Syntel Inc, a global outsourcing company said, "It is difficult for their employees, and clients to ignore the situation and this could impact their performance. It is feared that overseas investors will paint all IT companies with the same brush."
The market is bad enough. The terror attacks on Mumbai have further curtailed client visits- delaying the sales cycle, said Phaneesh Murthy, CEO, iGATE.
According to Nagaraja (Naga) Prakasam, managing director of CDC Software (India), the Satyam episode teaches a number of lessons chiefly importance of corporate governance. This will clearly mean all companies will look at good governance processes, and enhanced role of independent directors.
L. Subramanian, CEO of Chandamama.com, a children’s website with stories on Indian Mythology said, "It (the Satyam episode) is probably one of the most serious cases of breach of fiduciary responsibility that has come to light in India. After all the recriminations, I hope that wisdom will dawn on the regulators to figure out how to prevent such incidents rather than react to them. I think it is the trust placed by over 50,000 employees of Satyam that has been shaken, besides that of the shareholders. My one single question is - ‘where were the myriad auditors - financial, cost, management, quality systems auditors… surely someone knew that there was rot in the system and chose to keep quiet?"
"The corporate governance needs to be stronger," said Ajay Dhir, CIO of Jindal Stainless Ltd. "And the role of the independent directors, who act as the watch dogs needs to be more assertive." R. Mohan, director of Cache Technologies & Communication Ltd., a Singapore-based enterprise infrastructure solutions said that government should impose stricter norms on enterprises run by families.
Ramakrishna Voruganti, managing director of Barracuda Networks, a global player in email and Web security said, " I think Mr. Raju’s moving out will give Satyam a much-needed chance to take some hard decisions regarding restructuring, governance and their approach to customers. It would’ve more difficult to take difficult and independent decisions, with Raju at the helm."
CII president K V Kamath said there was a need to immediately examine the loopholes in regulation, accounting, audit and governance that allowed such lapses to occur and address them with urgency. He said corporate India must "reflect on ways to demonstrate its quality of governance and enhance the confidence of stakeholders." Both the chambers, however, insisted that the admission of ‘massive financial irregularity’ in Satyam’s books of accounts should not be seen as a blot on all the Indian firms. "While the occurrence of such events in a major company is a matter of deep regret, CII believes it would be inappropriate for this to be the basis of questioning of general governance standards in other companies," Kamath said.
Rajeev Chandrasekhar, president, Ficci said there are far too many self-congratulatory awards being given out in terms of corporate governance and disclosures. "What happened following Enron in the US is bound to happen here. There is going to be definitely a need for a deeper and harder look at the corporate governance," he said.
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